Early Initiatives

Since the appointment of the first Dominion Dairy Commissioner in 1890, the federal government has played an active role in the development and implementation of policies and programs in support of the dairy industry. Early federal initiatives included an iced butter railway car service (1895); funding for cool cheese curing rooms (1902); cow testing programs (1902); and the grading of butter and cheese for export (1923). The Government of Canada introduced a temporary subsidy on cheese and butter in 1935. Further programs to support prices, export surplus products, and limit imports were in effect throughout the 1940’s and 1950’s and were extended with the establishment of the Agricultural Stabilization Board in 1958.

Although it provided the necessary structure for price stabilization operations, the Agricultural Stabilization Board was not in a position to tackle two major problems critically affecting the dairy sector: a lack of co-ordination between federal and provincial policies, and the absence of an effective mechanism to control milk production.

It became clear that a mechanism was needed to ensure reasonable support prices for storable dairy products to underpin producer returns. New mechanisms were also needed to control costly surplus production. The federal government convened the 1963 Canadian Dairy Conference, which led to the creation of the Canadian Dairy Advisory Committee the same year. In its 1965 final report, this Committee recommended the creation of the Canadian Dairy Commission (CDC).

The CDC was established with the proclamation of the Canadian Dairy Commission Act  on October 31, 1966. Through the creation of this special Crown corporation, the federal government confirmed its commitment to a strong and viable dairy industry in Canada. The CDC operated the price, support, subsidy and export programs.

First Commissioners

The first three Commissioners of the CDC were S. Cliff Barry (Chairman); Jules Thibaudeau (Vice-Chairman) and Lyle Atkinson (Commissioner). The importance the government attached to this new agency was reflected in the appointment of Mr. Barry, a former Deputy Minister of Agriculture. The CDC continued the government’s earlier price support programs for butter, skim milk powder, and cheese which had been administered by the Agricultural Stabilization Board. From its inception, the CDC also assumed responsibility for administering the subsidy payment to industrial milk and cream producers.

In order to manage the production of industrial milk and to generate the funds required to cover the cost of exporting surplus products, it was necessary for provincial milk marketing organizations with statutory powers over prices and quotas to work with the CDC, which operated then the price support, subsidy and export programs.

Subsidy Eligibility Quotas

Subsidy Eligibility Quotas (SEQs) established in the early years of supply management were the precursor of the present day quota system. SEQs, however, did little to control milk production. Producers could ship milk in greater volumes than their respective SEQ allocation, and producers without quota were free to enter the market at any time they wished. Since the levies to support exports were deducted from the federal subsidy that was paid on production up to each producer’s SEQ level, these additional shipments could be made without the possibility of collecting funds for the disposal of the milk surpluses which resulted.

National Milk Marketing Plan

This led to the development of an Interim Comprehensive Milk Marketing Plan in 1970 and the subsequent establishment of the Canadian Milk Supply Management Committee (CMSMC). Ontario, Quebec and the federal government were the original parties to this Plan. All remaining provinces except Newfoundland entered the Plan by the end of 1974, thus becoming the National Milk Marketing Plan (NMMP). Since Newfoundland did not produce significant amounts of milk for industrial purposes and was not a signatory to the NMMP, it maintained observer status in national milk marketing activities. However, following months of negotiation with industry representatives, Newfoundland and the other nine provinces reached an agreement for Newfoundland’s entry into the NMMP and the Comprehensive Agreement on Pooling of Milk Revenues  effective August 1, 2001. The NMMP’s most important function is to establish the national milk production target for industrial milk in Canada.

One of the main achievements of the CDC continues to be its effective facilitation of discussions of the adapting CMSMC, as well as provincial government and industry working groups and sub-committees, in developing and refining the current milk supply management system in Canada. It also helps serve the dairy industry in many other areas, including policy development, international sales, marketing operations and research.

The Commission continues to actively participate in the ongoing development of the national dairy policy, the main element of which continues to be the production of milk within a supply management system.

Price Support

As one of the CDC’s legislated objectives is to ensure a fair return for efficient producers, many of its efforts have been directed at refining the price support program. In 1975, a Returns Adjustment Formula was devised to bring a more realistic estimation of producer costs into the determination of the support prices for butter and skim milk powder which underpin the returns that producers receive. This formula was replaced in 1988 by a pricing mechanism which captured cost of production data at the farm level.

In July 1990, the federal government asked the CDC to establish the support prices for industrial milk. In its final 1991 report, the Task Force on National Dairy Policy recommended that the CDC continue to exercise this authority in dairy pricing. In subsequent years, the CDC announced the producer target and product support prices as well as the assumed processor margin after consideration of the advice of a Consultative Committee and through consultations with other dairy stakeholders. In addition to its price support programs, the CDC worked with industry stakeholders to develop and implement other initiatives aimed at helping the dairy sector meet the changing needs of the marketplace.

Such initiatives included the provision of producer-financed assistance payments for exports of dairy products, and rebates which encouraged the increased use of Canadian dairy ingredients in products sold both domestically and abroad. These two approaches to competitive marketing were terminated on July 31, 1995.

In August 1995, the use of producer levies to finance the cost of planned exports and surplus removals was terminated. In its place, the dairy industry adopted a new system of pricing and pooling of market returns. Under this system, industrial milk is classified and made available for use in dairy products and products containing dairy ingredients at prices which vary according to the end use of the product. The pooling agreements, which the CDC administers on behalf of the industry, ensure that revenues are shared (or pooled) both nationally and regionally.

Policy Involvement

The CDC’s key role is to facilitate the design and implementation of major dairy policies and programs. From its input into the development of supply management in the early 1970’s to its current leadership role, the CDC still provides a framework for the federal/provincial participation that is crucial to the continued viability of the industry.

In fulfilling its facilitative role, the CDC works closely with the major stakeholder organizations including the Dairy Farmers of Canada, the Dairy Processors Association of Canada, the Consumers Association of Canada, provincial milk marketing boards and agencies, and provincial governments. Also involved are organizations representing further processors such as the Food and Consumer Products Manufacturers of Canada and the Grocery Division of the Retail Council of Canada.

For over 40 years, supply management has provided the dairy sector with stability and strength. In an era of continuing globalization of markets and evolution of domestic orderly marketing arrangements, the CDC believes that the co-operation and collaboration among stakeholders, which characterized the creation of supply management, remain the industry’s greatest strengths in ensuring the viability of Canada’s dairy industry in the years ahead.